Capital Budgeting Simulation Analysis

Capital Budgeting Simulation Analysis

  • Submitted By: cosmostang
  • Date Submitted: 08/21/2013 11:58 AM
  • Category: Business
  • Words: 1497
  • Page: 6
  • Views: 21

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New Heritage Doll Company
Capital Budgeting Simulation Analysis

Xiaomeng Jin (Emma)
Chuzhao Yin (Lavana)
Shuo Tang (Candy)
Cost of Capital Simulation

Capital Simulation Scenarios:
Constant EBITDA with high carryover
a. Fixed budget: 4.7 M per year
b. EBITDA percent 12%
c. Carryover 30%
For year 1
Scenario | Cost | NPV | IRR | Payback | PI | 1 Year EBITDA | 5 Year EBITDA |
Toddler Doll Accessory Line | 2.14 | 6.82 | 24.80% | 8.70 | 3.19 | -0.63 | 3.37 |
Retail Store Expansion in Northeast | 1.25 | 8.68 | 34.84% | 5.33 | 6.43 | 0.00 | 3.82 |
New Doll Film/DVD | 1.05 | 9.25 | 238.61% | 1.43 | 8.81 | -1.75 | 15.85 |

Explain the choices of first year projects. Which projects did you accept, and why?
We select three projects in the first year which are Toddler Doll Accessory Line, Retail Store Expansion in Northeast and New Doll Film/DVD. We have a fixed budget of 4.7 M per year, 30% carryover and 12% EBITDA. Although we have a high carryover, we prefer to spend up the budget in the first year. There are totally five projects in the first year. Limited by the budget, we rejected 'Match my Doll' Clothing Line and Warehouse Facility Consolidation. Three programs are left. As this is a Doll company, to have its own production line is necessary so the Toddler Doll Accessory Line is selected. Because New Doll Film/DVD costs low and has a high IRR so we also select this program. Then a budget of 1.32 M is left. We decide to use this money for one Retail store. By this way, we can have our production line to produce goods and stores to sell goods and the three divisions...

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